TAIWAN Law and Practice Contributed by: Jui-Hua Fan, Hsiang-Yang Hsieh, Chia-Hsin Wu, Chi-Ying Lee and Jin-Han Hsieh, Formosa Transnational Attorneys At Law
In 2021, the defendant published a promotional video and comparison chart claiming that the B Machines outperformed competing products. The advertise - ments included product images labelled as the “H brand”, together with comparisons against other well- known brands. The plaintiff alleged that the advertisements clear - ly referred to its products because its brand name begins with the letter “H” and the advertisements used images resembling the A Machines. According to the plaintiff, the advertisements falsely suggested that the A Machines were inferior to the B Machines, thereby constituting false or misleading representa - tions in violation of Article 24 of the TFTA. The defendant denied the allegations, arguing that the product images did not depict the plaintiff’s prod - ucts and that the term “H brand” merely described the side profile of the machines rather than identifying the plaintiff’s brand. Lower court decisions The court of first instance accepted the defendant’s arguments and held that the advertisements did not constitute false or misleading representations under the TFTA. The court also found that the plaintiff had failed to establish any compensable loss. On appeal, the Taiwan High Court reversed the judg - ment in part. The High Court concluded that a reason - able consumer would understand the advertisements as referring to the plaintiff’s products and brand for three principal reasons: • First, the advertisements compared products by referring to well-known brands using alphabetic designations, such as “H brand”, “S brand”, and “B brand”, enabling consumers to associate each designation with a particular brand. • Second, the defendant’s accompanying Q&A materials expressly referred to the plaintiff’s brand. • Third, consumer comments submitted in evidence demonstrated that a substantial number of con - sumers had in fact understood the advertisements as referring to the plaintiff’s products.
Accordingly, the High Court held that the advertise - ments constituted false or misleading representations amounting to unfair competition under the TFTA. Nevertheless, the High Court dismissed the plaintiff’s damages claim because the plaintiff had failed to pro - duce sufficient evidence establishing the amount of its loss. Both parties subsequently appealed to the Supreme Court. Supreme Court decision On further appeal, the Supreme Court partially reversed the High Court’s judgment and remanded the case for further proceedings. The Supreme Court emphasised that Article 31 (2) of the TFTA provides that, where an infringer has derived benefits from an act of unfair competition, the injured party may elect to calculate damages solely based on the profits obtained by the infringing party. According to the Court, this provision serves several legislative purposes. It reduces the evidentiary bur - den imposed on injured businesses, facilitates the enforcement of unfair competition claims, deprives infringers of the profits derived from unlawful conduct, and strengthens both the preventive and deterrent functions of the TFTA. The Court further observed that this statutory mechanism differs from the traditional compensatory damages model, which primarily seeks to restore the injured party to the position it would have occupied absent the infringement. The Supreme Court further observed that market competition is, by its nature, a zero-sum process. Where a business expands its market share through false or misleading comparative advertising, it inevita - bly diminishes the market opportunities of its competi - tors. If such advertising causes potential customers to distrust a competitor’s products and diverts trans - actions that would otherwise have been made with that competitor, the injured business is entitled to seek damages. Accordingly, where Article 31 (2) applies, the injured party may elect to calculate damages solely on the basis of the profits obtained by the infringing party, without proving the amount of its own loss.
190 A NTITRUST LI T IGATI O N 2026
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